October 27, 2008

“A meaningful scientific hypothesis or theory typically asserts that certain forces are, and other forces are not, important in understanding a particular class of phenomena. It is frequently convenient to present such a hypothesis by stating that the phenomena it is desired to predict behave in the world of observation as if they occurred in a hypothetical and highly simplified world containing only the forces that the hypothesis asserts to be important…. Such a theory cannot be tested by comparing its “assumptions” directly with “reality.” Indeed, there is no meaningful way in which this can be done.”

– Friedman

~~

” ‘reality’ [is] one of the few words that means nothing without quotes”

“‘Literature was not born the day when a boy crying “wolf, wolf” came running out of the Neanderthal valley with a big gray wolf at his heels; literature was born on the day when a boy came crying “wolf, wolf” and there was no wolf behind him.”

– Nabokov

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December 5, 2007

“Such a shock program could end inflation in months, and would set the stage for the solution of your second major problem – promoting an effective social market economy.
This problem is not of recent origin. It arises from trends towards socialism that started forty years ago, and reached their logical – and terrible – climax in the Allende regime. You have been extremely wise in adopting the many measures you have already taken to reverse this trend.”

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October 25, 2007

So last month I wrote an unsatisfactory post about Milton Friedman’s use of the opposition between freedom and coercion. I said that Friedman imagines the state as always and essentially coercive, and market exchange as always and essentially voluntary; and that this understate the extent to which the relation between citizen and state can be beneficial, and, more importantly, the extent to which market exchange can, and does, involve violence, and the threat of violence, and a host of marginally more subtle but nonetheless just as powerful mechanisms of coercion and control. Well, I didn’t say that, but I should have done. What I actually said was that any exchange or relationship involves an admixture of both freedom and coercion: that even torture leaves a sliver of freedom, and that even the most bilaterally voluntary exchange involves dissymmetries of power.

What was I thinking? In the first place – it’s obvious and sinister nonsense to imply that the self’s freedom can survive any violence inflicted on it. Violence can destroy anything; it’s nothing more than a consoling or self-exculpating fantasy to believe that the true free self is untouchable by the exigencies of physical trauma. Moreover, to phrase the matter in this way – to speak of an admixture of freedom and coercion – is to perpetuate the idea of a fundamental (if you like, metaphysical) opposition between the sovereign self and the world around it. Friedman uses the terms ‘voluntary’, ‘freedom’, ‘coercion’, etc., with an alarming lack of investigation into what they mean. If we take on board Friedman’s uses, and simply argue about the terms’ appropriate fields of application… well, we’ve already fucking lost.

In his 1976 lectures, which I’m reading now, Foucault discusses the concept of sovereignty, which he believes has dominated Western political discourse since the end of the middle ages. (I should have known all this already, of course, but I’m behind the curve, trying to catch up…) Foucault says that all theories of right are based on the attempt to establish a line between legitimate contract and illegitimate oppression. They attempt to establish a space of sovereignty, within which power is exercised legitimately, but beyond which power turns into coercion. And Foucault affiliates himself with (or expresses strong sympathy for) an alternative tradition, for which “the pertinent opposition is not, as in the previous schema, that between the legitimate and the illegitimate, but that between struggle and submission.” (‘Society Must Be Defended’, p. 17).

In other words, Foucault’s trying to do away with the opposition between freedom and coercion as our fundamental tool for political analysis. Power is everywhere; every relationship is a power relationship. The individual who exercises freedom, or is subject to coercion, is already a product of and conduit for power. “The individual is not… power’s opposite number; the individual is one of power’s first effects.” (p. 30). We therefore need to, as it were, strategically suspend the concept of freedom, and instead examine our societies and economies in terms of power relations. “[T]his means that rather than starting with the subject (or even subjects) and elements that exist prior to the relationship and that can be localized, we begin with the power relationship itself, with the actual or effective relationship of domination, and see how that relationship itself determines the elements to which it is applied.” (p. 45).

This is obviously relevant to economics. Rather than seeing the economy in terms of utility-maximising individuals, we should start by examining the power-relations that influence any given exchange – and create the possibility of exchange. “The possibility of co-ordination through voluntary co-operation rests on the elementary – yet frequently denied – proposition that both parties to an economic transaction benefit from it, provided the transaction is bi-laterally voluntary and informed.” (Friedman.) This valorisation of individual freedom destroys at its origin any attempt to examine the real power relations behind market transactions; and one of the ways it does so by inventing a fictional, subjective, and thoroughly un-analysable concept of ‘utility’.This means that an alternative economics, which takes power rather than freedom as its starting point, could in fact be more empirical and objective than the mainstream orthodoxy.

All this is probably desperately obvious. More to come as soon as I actually know something about anything.

October 4, 2007

Stop me if you’ve heard this one before. Economists love Freedom. And only capitalism can provide freedom, because only capitalism distributes goods and services by market methods. When I clock off at the end of another grisly working day, I can get the bus down to Bluewater, and buy whatever Noam Chomsky book I want – thanks to the magic of the market.

Of course this freedom is really freedom to buy and sell. I sell myself – I rent out my body and my mind – in exchange for money. Then I can use that money to buy, or rent, whatever I please – food, property, other people’s bodies and minds.

The freedom of capitalism is, in the first place, the freedom of the consumer. Only secondarily is it freedom of the worker. It’s a simple matter of power relations: those with money have power over those who need it. As a consumer, I have power; as a worker, I don’t. At the end of the working day you gasp for air – free at last! – because as you leave your employer’s domain you are transformed from servant into master.

In this world, money is freedom. You earn your freedom. You renounce your freedom in order to receive it. Freedom is transmitted, from the wealthy to the poor, in exchange for labour and obedience – the lack of freedom.

Now here’s Milton Friedman: “The ethical principle that would directly justify the distribution of income in a free market society is, ‘To each according to what he and the instruments he owns produces.’” (Capitalism and Freedom, p. 161-2)

Why would this be characteristically the ethical principle of a free society? What is the link, if any, between ethically justified earnings and the possession of productive resources? Furthermore: “What is the relation between this principle and another that seems ethically appealing, namely, equality of treatment?” (p. 162). “Are we prepared to urge on ourselves or our fellows that any person whose wealth exceeds the average of all persons in the world should immediately dispose of the excess by distributing it equally to all the rest of the world’s inhabitants?” (p. 165)

If, within the marketplace, money is freedom, then the question of the distribution of income is also the question of the distribution of freedom. Consider the law of diminishing marginal utility: the first dollar I earn gives me twice the utility of my second dollar, which gives me twice the utility of my third, and so on. Now re-apply this law to freedom. Let’s say the marginal freedom I get from each dollar earned diminishes as my earnings increase – not a wholly ridiculous idea. Don’t we have here a powerful argument for redistribution – based on the maximisation of freedom, and couched in the freedom-loving economists’ own terms?

Why doesn’t Friedman discuss this? Why does he see state-enforced income redistribution as only a theft, never a gift, of freedom?

September 14, 2007

The most dominant theme in Friedman’s book is the infringement on individual liberty by the state. The corollary of this theme is that decisions made through the market are voluntary.

This simplistic opposition is deeply flawed; it is the root source of Friedman’s malign political thinking.

In his chapter on social welfare measures, Friedman is attacking paternalism. “This position [a paternalistic advocacy of compulsory pensions] is internally consistent and logical. A thoroughgoing paternalist… cannot be dissuaded by being shown that he is making a mistake in logic. He is our opponent on grounds of principle, not simply a well-meaning but misguided friend. Basically, he believes in dictatorship, benevolent and maybe majoritarian, but dictatorship none the less.” (p. 187).

If Friedman is serious that paternalistic welfare is a form of dictatorship, then I see no way in which this argument can be restricted to welfare alone. If it is dictatorship for the state to interfere with the freedom of its citizens, then all state power is dictatorship. Democracy is majoritarian dictatorship.

This position, “internally consistent and logical”, leads to libertarian anarchism. But Friedman is not a libertarian anarchist. He believes in the legitimacy of some state power. Indeed, one of the chief claims of his book is that democracy is the best form of government.

How can Friedman square this advocacy of democracy with his condemnation of majoritarian dictatorship? It seems to me that he either needs to scale up his attack on government, or scale down his condemnation of paternalism. To attack welfare as a form of dictatorship, while making no such claims about other forms of democratic power, isn’t playing fair.

That’s the first problem with Friedman’s position: when it suits his argument, he presents state power as inherently and absolutely dictatorial. The second, bigger, problem is that he presents market transactions as inherently and absolutely voluntary.

“The possibility of co-ordination through voluntary co-operation rests on the elementary – yet frequently denied – proposition that both parties to an economic transaction benefit from it, provided the transaction is bi-laterally voluntary and informed.

“Exchange can therefore bring about co-ordination without coercion. A working model of a society organized through voluntary exchange is a free private enterprise exchange economy – what we have been calling competitive capitalism.” (p. 13).

But, as should be obvious, coercion is a matter of degree. Even the most horrific torture leaves a sliver of freedom; even the most bilaterally voluntary transaction involves dissymmetries of power. Every exchange involves a power relation; and these power relations have their influence on the movement of our economy. Friedman’s reification of free exchange evades the extent to which no exchange is ever wholly free.

On which subject there’s a whole lot more to say…

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September 9, 2007

“The more capitalistic a country is, the smaller the fraction of income paid for the use of what is generally regarded as capital, and the larger the fraction paid for human services. In underdeveloped countries like India, Egypt, and so on, something like half of total income is property income. In the United States, roughly one-fifth is property income. And in other advanced capitalist countries, the proportion is not very different. Of course, these countries have much more capital than the primitive countries but they are even richer in the productive capacity of their residents; hence, the larger income from property is a smaller fraction of the total. The great achievement of capitalism has not been the accumulation of property, it has been the opportunities it has offered to men and women to extend and develop and improve their capacities. Yet the enemies of capitalism are fond of castigating it as materialist, and its friends all too often apologize for capitalism’s materialism as a necessary cost of progress.” (Capitalism and Freedom, p. 169).

A remarkable passage. Friedman here seems unable to understand the concept of materialism except in relation to the distinction between physical and human capital. A materialist society, Friedman suggests, is a society dominated by physical commodities; a non-materialist society is society in which human services play a more important role.

But, of course, (do I need to say it?) this isn’t what materialism means. My Oxford dictionary’s first definition reads:

“a tendency to consider material possessions and physical comfort as more important than spiritual values.”

The contrast is between ‘economic’ factors (exemplified by material possessions but certainly including human services), and spiritual ones. A materialist perspective would, for instance, focus on the size and make-up of a nation’s income, while neglecting less tangible qualities of life. Friedman’s claim that capitalism is not materialistic is couched in the most materialistic terms imaginable.

September 7, 2007

Contrariwise, check out this interview with Friedman. It has two main positive features:

1) I agree with it, more or less. (Legalise all drugs; destroy the black market; make the war in Afghanistan at least not wholly untenable; have a big party.)
2) It’s hilarious.

On the other hand, Friedman as ever seems almost psychotically impervious to the real world.

“Interviewer: But with regard to crack, considering the fact that it’s very addictive and considering the fact that…

Friedman: That’s very dubious. It is addictive, but I understand from all the medical evidence that it’s no more addictive than other drugs. In fact, the most addictive drug everybody acknowledges is tobacco.”

Here’s a line from ‘Capitalism and Freedom’. If you listen closely when you read it, you can hear the collapse of neoliberal economics: a distant rumble and roar, like the sound of the sea within a shell.

“In a literal sense, if I have a property right to a particular piece of land, I can be said to have a monopoly with respect to that piece of land defined and enforced by the government.” (p. 127).

This is where even the idealised concept of perfect competition falls apart: there is no competition without property rights; and there are no property rights without a monopoly.

We’ll be spending some time on this, in the coming weeks and months.

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September 6, 2007

Here’s an interesting passage from the penultimate chapter of ‘Capitalism and Freedom’. (Sorry to keep banging on about this, but I’m going to be on the basics for… some time). Friedman is discussing the difference between “equality of rights and equality of opportunity, on the one hand, and material equality or equality of outcome on the other.” The true liberal, Friedman says, applauds the former but is deeply suspicious of the latter. This is what distinguishes the liberal from the egalitarian. The liberal “may approve state action toward ameliorating poverty as a more effective way in which the great bulk of the community can achieve a common objective. He will do so with regret, however, at having to substitute compulsory for voluntary action.”

“The egalitarian will go this far, too. But we will want to go further. He will defend taking from some to give to others, not as a more effective means whereby the ‘some’ can achieve an objective they want to achieve, but on grounds of ‘justice’. At this point, equality comes sharply into conflict with freedom; one must choose. One cannot be both an egalitatian, in this sense, and a liberal.” (p. 195).

I think this takes us pretty close to the heart of Friedman’s philosophy, and to the problems with it. With all due apologies for the incoherence of my thinking, there are difficulties here with what Friedman means by ‘freedom’ and ‘justice’.

The egalitarian “will defend taking from some to give to others, not as a more effective means whereby the ‘some’ can achieve an objective they want to achieve, but on grounds of ‘justice’.” I think it’s worth pointing out that this is true of virtually all political thinkers, at all times, everywhere. Try re-parsing this sentence, with its subject not egalitarianism, but the criminal justice system. When a criminal is robbed of his freedom by the state, this is a way in which the ‘some’ can achieve an objective they want to achieve. It is also a limitation of freedom in the name of justice. And Friedman has no objection to this form of justice. The loss of freedom that comes with the goal of economic justice is deplorable; the loss of freedom that comes from enforcing the laws of the land is commenable. Of course, in Friedman’s utopia those laws of the land would be severely restricted. But that doesn’t matter. The point is that Friedman’s love of freedom at no point moves him towards a position even vaguely resembling anarchism. He has no qualms about the right of government to punish and imprison its citizens. And Friedman doesn’t seem to be sufficiently conscious of the extent to which this puts him at odds with his own maxim, quoted above.

Let me go out on a glib, shaking limb. One way of considering the difference between ‘right’ and ‘left’ is by considering the different emphases these ideological alignments place on the concept of justice. When the right talks about justice, more often not it means the punishment of those who have transgressed society’s norms. “We demand justice”, on the pages of a right wing newspaper generally means “We demand punishment”: a punishment appropriate to the crime. When the left talks about justice, on the other hand, it generally means ‘social justice’: the reduction of income disparity, an end to prejudice, ‘fair trade’, etc.

Of course both concepts are always in operation. They’re not even really separate concepts. But my point is: there’s no prima facie reason why the right’s ‘concept’ of justice involves less of an infringement of liberty than the left’s.

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September 3, 2007

A friend once said that everyone who studies economics becomes right wing. I hope to avoid that fate. But, at the same time, I want to be open to the possibility of conversion. I want to give the forces of evil a fair hearing. So I’m reading Friedman; and, having trogged through his attacks on socialised health care, the federal reserve, public housing, etc, I reach the other side of the coin: the negative income tax. It turns out that Friedman’s slash and burn approach to welfare is counterbalanced by his advocacy of a guaranteed minimum income. I’ve been doing some googling, and have to lot to read. There seem to be various cogent objections. (The puniness of Friedman’s proposed tax credits, for one. The administrative nightmares exemplified by Brown’s U.K. tax credits, for another). Still, it’s given me pause. Seen in the right light, it looks like a wonderful idea.

And now here’s an interview with the Belgian political philosopher Philippe Van Parjis, who is, apparently, the leading advocate of unconditional basic income. His proposals are rather more leftist than Friedman’s; he’s a sort of pro-capitalist Marxist, if that makes any sense. I obviously ought to read his books; but, for now, I particularly enjoyed this passage:

“When I first set about putting the arguments for basic income… I found I was confronted first and foremost not by technical, administrative and economic arguments, but by moral ones. The main moral objection was that basic income would be giving people something for nothing, and that it amounted to systematic legitimation of free riding on the part of the idlers at the expense of the hard workers. And so that forced me to spell out why, fundamentally, I thought this was such a good and fair idea.”